Philippines Receives Boost to Investment-Grade Rating

As of late, the Philippines have experienced robust economic growth coupled with low inflation.  These positive economic indicators, among other factors, have led Moody’s Investor Services to give the country an investment-grade rating.  An economic growth rate of 5.2% in 2006 has continued to climb and currently is at 7.6%- a rate that is consistent with the fastest growing countries in the region and high-growth emerging markets around the world.

The upgraded rating by Moody’s marks the third of four world leading rating agencies that have given the Philippines an investment-grade rating; the other two investment-grade ratings were offered by Fitch Ratings and Standard & Poor’s.  In a news release, Moody’s said, “The new growth path is being reinforced in part by improved fiscal management.  Revenue growth has accommodated sizable increases in infrastructure and social spending.”  Improved governance is another factor that Moody’s mentioned as being influential in their decision.  The government, led by President Benigno S. Aquino III, has sought to diversify the economy by bolstering the tourism industry and has vowed to crack down on corruption and tax evasion.  These measures have been effective thus far and have led to an increased confidence in the Philippines’ government. 

The Philippines’ investment-grade rating will encourage more investments—both domestic and foreign.  Foreign investors will be more willing to invest in a country that has reached the investment-grade rating plateau because it implies that default is less likely.  An increased flow of investments will enable the Philippines to sustain their rapid economic growth. 

In order for the Philippines to continue to grow economically at this pace there are a few challenges that must be addressed.  They are as follows: millions of people still enveloped in poverty, too much reliance on money sent back to the Philippines from Filipinos working abroad; and the lack of a manufacturing base that can effectively lift millions out of poverty.  If the Philippines face these issues and begin to rectify them, it is reasonable to assume that high-economic growth will continue into the foreseeable future.